Eq: Dev ex-US

In order to boost its nascent recovery, Spanish PM Rajoy has announced that the country will cut taxes and add €6.3 bn in stimulus. The government will lower the corporate tax rate from 30% to 25% and try to put more money back in the pockets of families in an effort to “improve the competitiveness of the economy, raise savings and above all else to boost employment,” said Rajoy. However, many will be skeptical of the plans, as Spain has promised to meet a target of a 3% budget deficit in 2016, but is still running a 5.6% deficit this year and is forecasted to manage a 6.1% deficit in 2015. The €6.3 stimulus would be part-funded by the private sector and part-funded by the public sector, and Rajoy hopes it will boost investment in research and development and “re-industrialise” the nation. The move is part of a political attempt to boost the popularity of Mr. Rajoy’s party, PP, after they performed poorly in recent European parliamentary elections. Many Spaniards feel as though they are yet to benefit from the reported 1% growth of the economy.

FINSUM: Spain is loosening the belt to boost its recovery despite the fact that this runs directly against current EU fiscal doctrine. Hopefully it has the intended effect, because the budget deficit stills looks wide, and the country cannot afford to slip further.